CIMdata Reports Continuing Strong PLM Market Growth

ANN ARBOR, Michigan, April 23, 2003—According to figures released from consulting and research firm CIMdata, Inc., the worldwide Product Lifecycle Management (PLM) market continued to grow during 2002 despite depressed global economies. CIMdata defines the PLM market into two segments - authoring and analysis tools (such as CAD/CAM, EDA, etc.) and collaborative Product Definition Management (cPDm). (See definitions at the end of this press release.)

According to CIMdata, PLM growth was concentrated in the cPDm segment, which reached $4.2 billion in 2002 for an apparent increase of 16% over 2001. When 2001 service revenues previously under- reported by vendors are taken into account, the 2002 cPDm growth rate is pegged at a more modest 8% -- still a respectable increase considering the world's sluggish economy. In fact, cPDm growth currently is being driven by PLM-related services, which increased 16% during 2002 while software revenues declined approximately 7%.

CIMdata forecasts overall PLM investments will continue growing at a solid pace over the next five years to exceed $20 billion by 2007 (as shown in Figure 1). The firm predicts the cPDm portion of the PLM market will exceed $4.7 billion in 2003 and $9.3 billion by 2007 for a compound annual growth rate (CAGR) of 17% (as shown in Figure 2). The tools portion of the PLM market is estimated to grow at a CAGR of 3% over the next 5 years to reach $11.8 billion by 2007.

Figure 1. Overall PLM Market –Market Growth Estimates—2003 to 2007

“Continued investment in PLM solutions in the face of the global economic conditions affirms that companies clearly recognize PLM as fundamental for them to improve their top and bottom line performance. Significant services growth in spite of the small decline in new license sales is an indication that companies are continuing to deploy and expand their PLM solutions,” says CIMdata President Ed Miller.

Figure 2. cPDm Market Growth Estimates—2003 to 2007

According to Miller, in the 1990s companies focused primarily on operational efficiency, leading to significant expenditures for ERP deployments. Later into the decade and into the new millennium, companies shifted more funding to other business initiatives such as PLM, customer relationship management, and supply chain management that boost business performance and revenue growth and bottom line profitability.

“Senior-level executives now recognize that PLM is critical to business success,” explains Miller. “By managing and leveraging product information across the extended enterprise, PLM enhances business performance by supporting innovation-oriented initiatives such as supply chain management, integrated product development, design collaboration, intellectual supply chain management, product requirements/ portfolio management, and global resource utilization: initiatives that can make or break a company. Because it enables businesses to bring innovative and profitable products to market effectively, PLM and the collaborative capabilities it provides are rapidly transitioning from a competitive advantage to competitive necessity. With so much at stake, companies are implementing PLM solutions in record numbers.”

According to Miller, there is a growing awareness that product innovation is a critical element of business success built upon solutions that enable widely distributed teams throughout an extended enterprise to work more collaboratively in developing products, plants, and facilities. “This executive level awareness is fueling investments in collaborative initiatives that are at the heart of cPDm, a primary enabler for PLM.”
Miller says that despite tough economic times, these business drivers are fueling a broad expansion of the cPDm core market as PLM programs become mainstream and are implemented across the enterprise.

Additionally, the continually expanding and overlapping scope of related technologies offers companies a broader range of capabilities to address their requirements. Deployment of comprehensive PLM solutions also involves integration with multiple internal and external business systems, further fueling expenditures for PLM products and services over the next several years.

Diverse Market Sectors
“A wide range of companies supply PLM-related software, applications and services,” explains Ken Amann, CIMdata Director of Research. The cPDm market has three primary sub-segments: comprehensive technology suppliers, system integrators-resellers-VARs, and focused application suppliers including visualization and collaboration, digital manufacturing, component supplier management, and content management. (as shown in Figure 3)

Figure 3. Market Segments Percentages of cPDm Revenues - 2002

Comprehensive suppliers (e.g., IBM/Dassault, EDS, MatrixOne, PTC, SAP, etc.) comprise 56% of the cPDm segment of the PLM market, up from 54% in 2001. “Increased investments were driven by the broadening scope of enterprise-wide implementations, expansion into new areas such as in-service support, packaged solutions, and integration with other business initiatives such as customer relationship management,” explained Amann. Comprehensive PLM technology suppliers are packaging their products into solutions that focus on and support the practices of specific industries. “The growth of supplier developed “packaged solutions” is significantly reducing the time and cost of PLM implementation. Faster implementation and time to return-on-investment (ROI) are enabling small and medium size business to also adopt PLM solutions,” according to Mr. Amann.

Independent consultancies, systems integrators (SIs), resellers, and VARs (e.g., Accenture, Deloitte Consulting, CSC, T-Systems, RAND Worldwide, etc.) comprised 28% of market investments in 2002 and experienced solid growth as both the scope and pace of implementations continued to expand. Major comprehensive technology suppliers also expanded their direct service delivery programs and development of alliances with SIs and resellers. “The SIs are establishing business programs that complement their supply chain management, new product introduction, collaboration and other business initiatives and are teaming with one or more of the comprehensive technology suppliers to enable them to respond to diverse client situations,” stated Amann.

Focused application suppliers comprised 16% of the cPDm segment of the PLM market. This segment includes suppliers such as Cimage Novasoft, Documentum, FileNET, and Tecnomatix, as well as third party visualization and collaboration suppliers such as Cimmetry, CoCreate, and Spicer. During 2002, several new companies began delivering products that enhance and expand PLM solutions, addressing areas such as intelligent backup and data continuity, heterogeneous data federation, and improved digital data transmission. Other focused applications suppliers also offer capabilities that broaden the scope and improve the effectiveness of core PLM solutions. Companies such as Sopheon, and MS2, provide tools and solutions for full program management, knowledge and expertise management and automated capture of intellectual capital. A major growing area of the industry is the development of extensive solutions focused on digital manufacturing planning and simulation (MPM). Major providers of these solutions include Dassault Systèmes and their DELMIA product suite, EDS, Polyplan, and Tecnomatix. During 2002, EDS and Tecnomatix established an alliance to build on and leverage each others product suites.

Vendor Rankings
According to CIMdata's revenue estimates for 2002, the market revenue leader among the comprehensive cPDm technology suppliers is EDS PLM Solutions followed by IBM PLM Solutions/ Dassault Systémes, SAP, PTC, and MatrixOne.

As can be seen in Figure 4, some of these leading organizations generate a substantial portion of their revenues through services. Both EDS and IBM have significant services organizations that provide an extensive set of PLM services for multiple product suites, not only those primarily sold by the parent company.

Figure 4. cPDm Revenue Leaders – 2002
(Comprehensive Technology Suppliers Only)
(Revenue information represents CIMdata's estimates for 2002)

Many of the comprehensive cPDm technology suppliers provide products and services through their own field sales and support organizations - this is their core or direct revenue. Most also leverage SIs, resellers, and other partners for additional sales and services – their partner revenues. The combined core and partner revenues can greatly expand the visibility and impact of a supplier on the industry, generating a significant market presence or footprint. Based on these combined revenues, CIMdata's analysis indicates that the global comprehensive technology supplier with the greatest market presence (as shown in Figure 5) in the cPDm segment of the PLM market is EDS, followed by Dassault Systèmes, SAP, MatrixOne, PTC, and Agile. Dassault Systèmes' market presence includes IBM PLM Solutions and other suppliers for which Dassault Systèmes is the technology provider.

Figure 5. cPDm Market Presence – 2002
(Market share information represents CIMdata's estimates for 2002)

Note: Dassault Systèmes partner revenue includes IBM DS-based cPDm revenue

When suppliers with broad-based capabilities that support a full product lifecycle-focused solution are considered, including both cPDm and the authoring and analysis tools capabilities, then a relatively small set of suppliers emerge as the overall PLM mindshare leaders, i.e., those companies who are frequently considered to be leading the market through either revenue generation or thought leadership. Typically, this group is focused on providing solutions capable of supporting the world's largest corporations. This group includes EDS, IBM/Dassault Systèmes, MatrixOne, PTC, and SAP. The revenues for some members of this group are still dominated by revenues that they generate from the tools portion of their product suites, but their cPDm revenues are growing and becoming a larger portion of their overall business. Full PLM-based revenues from these companies are shown in the Figure 6.

Figure 6. Leading Comprehensive Technology Suppliers Overall PLM Revenues – 2002
(Revenue information represents CIMdata's estimates for 2002)

Note 1: DS Corp Revenue presents direct PLM revenue of Dassault Systèmes
Note 2: SAP and MatrixOne do not develop authoring and analysis tools

Activities of the Major Players
The leading suppliers maintained their strong market positions through numerous continuing efforts and strategies.

EDS (NYSE: EDS) maintained its cPDm revenue leadership position during 2002. While new license sales were down slightly, it increased service revenues to offset the license decline. During the year, EDS made significant progress in integrating the former SDRC and UGS product suites and added new and expanded capabilities. EDS also continued to integrate PLM further across all its other business units, namely AT Kearney, Solutions Consulting, and Operations Consulting, in support of the PLM Solutions business unit. In addition, EDS established a strategic relationship with Tecnomatix to enhance and expand both companies' digital manufacturing/MPM offerings. EDS continues to offer one of the most comprehensive PLM solution portfolios in the industry. While maintaining a strong market position in key industry sectors, including automotive and aerospace, EDS has developed focused solutions for the high tech and consumer packaged goods industries.

Dassault Systèmes (NASDAQ: DASTY; Euronext Paris: #13065, DSY.PA) was the only major PLM technology provider to see significant increases in new license revenues during 2002. While both tools and cPDm sectors had revenue increases, cPDm (i.e., ENOVIA and SMARTEAM) was the fastest growing segment of their product suite. Dassault Systèmes continued its integration of SMARTEAM with ENOVIA and CATIA. The Dassault Systèmes family of products continues to be one of the broadest and deepest PLM offerings in the industry and provides PLM solutions that support small to medium size companies as well as large global enterprises. While Dassault Systèmes continued to leverage its relationship with IBM in 2002, it expanded its overall partner program with the addition of RAND Worldwide as a reseller and implementer of Dassault Systèmes products.

IBM (NYSE: IBM) continued to develop PLM as a major business focus within the corporation. IBM was aggressive in making acquisitions that strengthen its overall PLM solution and delivery capability. In 2002, IBM purchased PricewaterhouseCoopers Consulting (PwCC) and incorporated it into the newly formed Business Consulting Service, an organization within IBM's Global Services (IGS) business unit. This acquisition added PLM strategic management consulting and cultural change management expertise as well as additional PLM implementation capabilities to IBM's extensive resource pool. PwCC also brought PTC Windchill, MatrixOne, and mySAP PLM expertise and business to IBM. An acquisition that was announced, but not finalized in 2002, was that of Matra Datavision from EADS. This acquisition will expand IBM's PLM capabilities with the addition of a group that has been primarily focused on providing PLM services based on Dassault Systèmes' suite of PLM products. Also in 2002, IBM began selling SMARTEAM as an integral part of its PLM offerings, and the growth of SMARTEAM and ENOVIA increased IBM's market position throughout 2002. In addition, IBM PLM Solutions continues to leverage their large and growing CAD/CAM customer base.

SAP (NYSE: SAP) continued to broaden and develop its PLM solution with a major focus on recipe and asset management for the process industries during 2002. SAP also began extending their PLM offering to service and maintenance management. SAP saw new license revenue decline during 2002 but that decline was offset by increased software maintenance and service revenues. In addition, they continued to develop their partnership program for PLM and began to see an increase in partner activity built upon mySAP PLM solutions.

PTC (NASDAQ: PMTC) continued to grow their Windchill program with the release of a number of focused business solutions during 2002. To clarify their philosophy and provide direction to their clients, PTC established their “Product First” initiative and roadmap to guide customers in implementing PLM solutions that provide a comprehensive approach to solving specific business problems. PTC also released their new Wildfire program that provided a redesigned Pro/ENGINEER user interface as well as embedded collaborative capabilities from their Windchill suite. The Wildfire release provides a solid upgrade path for their installed Pro/ENGINEER customer base. Also in 2002, PTC continued to develop and expand its partner program, and as a result they saw significant partner revenue growth based on their product suite that in turn should continue to expand their market presence. While 2002 was a difficult year for PTC, one in which new license revenues for both tools and cPDm products declined, their new product program releases were quite visible and substantive.

MatrixOne (NASDAQ: MONE) saw direct revenues decline during 2002 but maintain continued growth within their partner community. They continue to effectively leverage partners and systems integrators, who have created a substantial economy built on MatrixOne's technologies and business solutions. Throughout 2002, MatrixOne continued aggressive development of their value chain portfolio of out-of-the-box solutions. This integrated suite has received solid acceptance in the market place. Additionally, MatrixOne began to focus on industry-oriented solutions in automotive and high-tech, and with a technical specification solution for the consumer packaged goods industry developed at Procter & Gamble in conjunction with IBM Global Services.

Agile (NASDAQ: AGIL) had a decline in overall revenues during 2002 but continued to expand their focus to a broader market. They continue to differentiate themselves and are applying the same marketing and product strategies and techniques they have used very successfully in the high tech sector to new industries. Agile also established a strategic partnership with PeopleSoft in 2002 with the two companies integrating their product suites to provide PLM solutions to PeopleSoft's customers. In addition, Agile continued to develop packaged solutions such as Product Cost Management to address business requirements.

About CIMdata
CIMdata, a leading and independent worldwide strategic consultancy is dedicated to maximizing an enterprise's ability to design and deliver innovative products and services through the application of PLM solutions. CIMdata works with both industrial organizations and suppliers of technologies and services seeking competitive advantage in the global economy.

CIMdata helps industrial organizations establish effective PLM strategies, assists in the identification of requirements and selection of PLM technologies, helps organizations optimize their operational structure and processes to implement solutions, and assists in the deployment of these solutions.

For PLM solution suppliers, CIMdata helps define business and market strategies, delivers worldwide market information and analyses, provides education and support for internal sales and marketing teams, as well as overall support at all stages of business and product programs to make them optimally effective in their markets.

CIMdata provides world-class knowledge, expertise, and best-practice methods on PLM solutions. These solutions incorporate both business processes and a wide-ranging set of PLM enabling technologies including product data management (PDM), visualization, collaboration, digital manufacturing, computer-aided design/manufacturing (CAD/CAM), and numerical control (NC). CIMdata also provides expertise in the integration of PLM with other business solutions such as customer relationship management (CRM), supply chain management (SCM), and enterprise resource planning (ERP).

In addition to consulting, CIMdata provides industry education through international conferences in the US, Europe, and Japan that focus on PLM. The company also conducts research, provides PLM-focused subscription services, and produces several commercial publications. CIMdata serves clients worldwide from locations in North America, Europe, and Asia Pacific.

To learn more about CIMdata's services, visit our website at www.CIMdata.com or contact CIMdata at:
3909 Research Park Drive,
Ann Arbor, MI 48108, USA.
Tel: +1 (734) 668-9922.
Fax: +1 (734) 668-1957.

Definitions
CIMdata defines PLM as a strategic business approach that applies a consistent set of business solutions in support of the collaborative creation, management, dissemination, and use of product definition information across the extended enterprise from concept to end of life – integrating people, processes, business systems, and information. PLM forms the product information backbone for a company and its extended enterprise. It is composed of multiple elements including: foundation technologies and standards (e.g., XML, visualization, collaboration, and enterprise application integration), information authoring and analysis tools (e.g., MCAD, ECAD, FEA, and technical publishing), core functions (e.g., data vaults, document and content management, workflow and program management), functional applications (e.g., configuration management), and business/industry solutions (e.g., automotive supplier, high tech) built on the other PLM elements.

The cPDm segment of the PLM market encompasses all of PLM except for information authoring and analysis tools such as mechanical and electronic computer-aided design (MCAD and ECAD), computer-aided software engineering (CASE), and technical publishing. cPDm is focused on collaboration, management and sharing of product related information.